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The paper proposes the link between cryptocurrency implementation in the financial sector and energy consumption worldwide. The underlying mechanism of this blockchain infrastructure is described, practical cases of its adoption in various segments of the financial sector are provided. This paper tries to explain the power consumption of the cryptocurrency mining at the case of Bitcoin, Ethereum, Monero, Litecoin. Since mining is not regulated by the state, and even banned in some countries, it is difficult to find accurate data on how much electricity is spent on it. Method of Herfindahl–Hirschman is used for efficiency estimate of crypto market.Keywords: energy consumption, mining pools, bitcoin, blockchain, cryptocurrency, cloud mining.JEL Classifications: G32, G34, O33.DOI: https://doi.org/10.32479/ijeep.7685
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International Journal of Energy Economics and Policy | Vol 9 • Issue 4 • 2019
22
International Journal of Energy Economics and
Policy
ISSN: 2146-4553
available at http: www.econjournals.com
International Journal of Energy Economics and Policy, 2019, 9(4), 22-29.
Blockchain Infrastructure and Growth of Global Power
Consumption
Valeriia Denisova1*, Alexey Mikhaylov2, Evgeny Lopatin3
1British College of Banking and Finance, London, United Kingdom, 2Department of Financial Markets and Banks, Financial
University under the Government of the Russian Federation, Moscow, Russia, 3 British College of Banking and Finance, London,
United Kingdom. *Email: valeriadenisova@yandex.ru
Received: 13 February 2019 Accepted: 20 May 2019 DOI: https://doi.org/10.32479/ijeep.7685
ABSTRACT
The paper proposes the link between cryptocurrency implementation in the nancial sector and energy consumption worldwide. The underlying
mechanism of this blockchain infrastructure is described, practical cases of its adoption in various segments of the nancial sector are provided.
This paper tries to explain the power consumption of the cryptocurrency mining at the case of Bitcoin, Ethereum, Monero, Litecoin. Since mining
is not regulated by the state, and even banned in some countries, it is difcult to nd accurate data on how much electricity is spent on it. Method of
Herndahl–Hirschman is used for efciency estimate of crypto market.
Keywords: Energy Consumption, Mining Pools, Bitcoin, Blockchain, Cryptocurrency, Cloud Mining
JEL Classications: G32, G34, O33.
1. INTRODUCTION
Blockchain is one of the most popular terms associated with
changes in the technological paradigm taking place within the
framework of the so-called “fourth industrial revolution” (Bech
and Garratt, 2017; Byström, 2016).
This concept came into use not only in professional, but also
quasi-professional forums, as well as in discussions in the
media. However, people do not always pay due attention to the
mechanism of its functioning, the identication of potential
benets and difculties associated with its implementation.
This is also true for the nancial sector, where the blockchain
can be widely used as a technological basis for new instruments
to attract external nancing and organize corporate governance.
With its help, it is possible to reduce the unproductive costs of
nancial institutions, which even in the US and leading European
countries make up at least 2% of the attracted resources. However,
this value has not decreased over the past decades (Bazot, 2017;
Philippon, 2016).
In this context, it is advisable to analyze the mechanism of
functioning of the blockchain in conjunction with the most
signicant examples of its use in nance. As such, innovations in
the organization of exchange trading, investment and commercial
banking, insurance, audit, accompanying changes in approaches
to corporate governance, as well as in nancial analysis are
considered.
The article particularly focuses on the prospects of blockchain-
based cryptocurrencies, which are issued for circulation by both
private issuers and (potentially) central banks of sovereign states.
Blockchain is a continuous sequential chain of blocks containing
information formed according to certain rules. As for economic
processes, these blocks record information about transactions and
This Journal is licensed under a Creative Commons Attribution 4.0 International License
Denisova, et al.: Blockchain Infrastructure and Growth of Global Power Consumption
International Journal of Energy Economics and Policy | Vol 9 • Issue 4 • 2019 23
their characteristics. The key one is the timestamp of registering a
single transaction in the block and forming the block as a whole.
2. LITERATURE REVIEW
The idea to organize the storage of information by means of
related blocks was proposed originally by cryptography specialists
(Haber and Stornetta, 1991). They considered it possible to
develop a digital document (register), which records the time of
the intellectual property right. In this case, the creators of creative
products themselves, to whom the rights arose, had to provide the
relevant information until the moment when someone had time
to reproduce it.
The idea of decentralized lling of interconnected information
blocks, along with the ability to verify the correctness of their
filling by all participants, was developed in 2008, when an
algorithm was developed, which could be implemented in practice
(Nakamoto, 2008). In 2009, the rst cryptocurrency (bitcoin) was
released on its basis.
Blockchain technology, which is the basis of bitcoin, allows for
the combining in one block, information about transactions with
a total volume of 1 megabyte. The formation of one block takes
10 min on average. A chain of blocks is formed by hash functions,
a cryptographic technology that allows you to encode and embed
information about transactions made in the previous block into
each subsequent one. This principle of chain formation practically
guarantees its invulnerability to fraudulent attempts to change
information about transactions in one of the blocks: The person who
undertook a hacker attack would have had to make changes in all
subsequent blocks by changing their hash-headlines. It is obvious
that blockchain users would easily notice these attempts, since the
emerging block chain is fully available for their monitoring1. In
addition, it is extremely difcult in terms of resources required,
since to “rewrite” one block significant processing power is
required, which leads to high energy consumption.
It is worth noting that the decentralized blockchain technology is
based on the computational efforts of the so-called miners who
use special equipment to identify a suitable (from a cryptographic
point of view) hash-headline for each block.
This search is carried out by trial and error, and the miner who
nds the correct hash-headline receives a reward that is xed in
bitcoins. To a large extent, the work performed by miners provides
protection of blockchain technology from hacker inuences: The
more resource-intensive the process of enabling an additional
block, the higher the degree of security (Mikhaylov, 2018b).
Commissions are an additional source of income for miners that
are paid for the accelerated recording of information about a
particular transaction in the emerging block2.
1 When making transactions, you can maintain condentiality by using
nicknames or special protocols that allow you to completely anonymous
transactions.
2 The presence of a limit on the amount of information to be recorded
in each block, objectively reduces the ability to receive commission
3. METHODS
In terms of economic theory, the organizational principles of
blockchain operation can signicantly reduce the costs associated
with the verication of transactions and the creation of a distributed
network (Catalini and Gans, 2016). This creates the potential for
large-scale transformation of existing markets and the formation
of new ones. Therefore, the blockchain can be considered
as an example of a general-purpose technology, which is the
fundamental factor of long-term economic growth.
Then, economic development is presented as a succession of this
kind of technology. Nevertheless, it does not necessarily occur at
regular intervals: There may be innovative pauses, which are often
resolved through the crisis (Mikhaylov, 2018a). In this sense, the
development and implementation of the blockchain following the
global nancial crisis of 2007-2009 looks symbolic.
American researchers of the digital economy Catalini and Gans
(2016) believe that further penetration of blockchain technologies
will be faster in areas where a high degree of standardization of
transactions has already been achieved or where the state itself is
ready to implement these technologies.
The rst case is about the development of so-called smart contracts
that provide, for example, foreign exchange transactions of banks,
the trading of futures contracts, etc. At the same time, obviously,
there will be a need for an external intermediary that plays the role
of the operator of this technology, but the transactions between
the counterparties will be carried out in a decentralized manner. In
the second case, a lower degree of decentralization is envisaged:
The functions of the technology operator and verication of the
authenticity of transactions are reserved by the state.
The second case provides for a lower degree of decentralization:
The functions of the technology operator and verification
of the authenticity of transactions are reserved by the state.
Sometimes this approach is called permissioned blockchain
technology. Its application mainly covers the creation of public
goods: Maintenance of property registers, issuance of ofcial
documents, etc.
For example, Massachusetts Institute of Technology introduced
the accounting of diplomas issued on the basis of blockchain:
In the summer of 2017, a group of 111 graduates was offered to
receive, along with the traditional format, electronic diplomas
that allow to certify their authenticity for the employer and other
interested parties using blockchain. Leading universities in China
and India, where there is an issue of fake diplomas, are considering
introducing similar approaches. In Sweden and Brazil land rights
are registered on the basis of blockchain technology.
Integration of blockchain with the internet of things is also
promising. For example, air pollution sensors or weather sensors
income. Blockchain technologies, which are the basis of cryptocurrencies
alternative to bitcoin, provide storage in the block of information exceeding
1 megabyte, as well as a higher rate of block formation.
Denisova, et al.: Blockchain Infrastructure and Growth of Global Power Consumption
International Journal of Energy Economics and Policy | Vol 9 • Issue 4 • 2019
24
can transmit local information to a common network, including
on a reimbursable basis, when such data transmission is mediated
by payments using cryptocurrencies. Smartphones and other
mobile devices (tablets) can be equipped with additional chips
for cryptocurrency mining. (Mikhaylov et al., 2018).
Blockchain can increase the transparency of ownership of joint-
stock property (Yermack, 2017). Similar to registers of various
property rights, this technology allows to take into account changes
in shareholders’ shares.
With its widespread use, this would increase the efciency of the
stock market as a whole by reducing information asymmetry and
dramatically complicating insider trading (Nyangarika, 2019a;
Nyangarika, 2019b).
The most famous part of blockchain infrastructure is crypto
market.
We use market concentration index calculated by the capitalization
of the digital currencies (CR-4) and the Herndahl—Hirschman
Index (HHI), it is clear that this market remained essentially
monocentric in 2014-2016.
2
1
N
i
i
HS
=
= (1)
Where Si is the market share of crypto currency i in the crypto
market, and N is the number of cryptocurrencies. We will use a
normed Herndahl index like here:
( 1/ )
* for 1, * 1for 1
1 1/
HN
H NH N
N
= >= =
(2)
Where again, N is the number of cryptocurrencies in the market,
and H is the usual Herndahl index.
In general, the stock exchange infrastructure is promising for the
use of blockchain technologies. In addition to registration and
depository activities, they can be used to accelerate and reduce
the cost of clearing operations.
The rst platform that transferred this kind of transactions on
the blockchain was the Sydney stock exchange. NASDAQ, the
London stock exchange and a number of other leading securities
trading centers are currently working on similar solutions. After
the global nancial crisis of 2007-2009, the regulation of trade
in derivative nancial instruments was tightened. In particular,
settlements between participants in derivatives trading are now
mandatory through a central counterparty performing clearing
(Nyangarika at al., 2018).
4. RESULTS
The cost of bitcoin for break-even mining, including the cost of
electricity and depreciation, is about $5000, the publication refers
to unnamed experts. Bitcoin fell in December, 2018 to the price
of $3200-it is 80% lower than last year, notes FT.
The bitcoin hash rate, a value that shows how much energy miners
use, has fallen by more than 40% since August. It means that since
September, about 1.5 million bitcoin mining farms have been shut
down in 2018. The most protable liquid crypto currency to mine
XMR and LTC (Table 1).
Even though blockchain technologies can lead to a large-scale
transformation of the nancial sector, contributing to new forms
of capital raising and signicant cost savings arising from standard
transactions, it is premature to argue that digital currencies based on
them will be able to seriously compete with traditional ones in the
coming years (Narayan et al., 2016; Narayan and Sharma, 2011).
On the back of the so-called industrial revolution, the qualitative
characteristics of demand are changing. So, it is important, in
particular, the environmental friendliness of electricity generation.
Experts with reference to the data of the International energy
Agency note that electricity is a source of 42% of anthropogenic
greenhouse gas emissions, which leads not only to global warming,
but also to an increase in government and business spending on
Table 1: Energy consumption and mining protability for BTC, ETH, XMR, LTC
Indicator ВТС ETH XMR LTC
Protability −76% 642% 335% 312%
Prot per day $−2.18 $2.59 $9.66 $8.99
Day pool fee $0.007116 $0.03025 $0.1267 $0.1199
Mined/day BTC 0.0001962 ETH 0.02486 XMR 0.2620 LTC 0.2778
Power cost/day $2.88 $0.4032 $2.88 $2.88
Prot per week $−15.23 $18.14 $67.62 $62.90
Week pool fee $0.04981 $0.2117 $0.8867 $0.8390
Mined/week BTC 0.001374 ETH 0.1740 XMR 1.83 LTC 1.94
Power cost/week $20.16 $2.82 $20.16 $20.16
Prot per month $−65.27 $77.74 $289.82 $269.58
Month pool fee $0.2135 $0.9075 $3.80 $3.60
Mined/month BTC 0.005887 ETH 0.7458 XMR 7.86 LTC 8.34
Power cost/year $1359.20 $147.17 $1261.44 $1051.20
Prot per year $−794.06 $10.94 $3,526.10 $3,279.90
Year pool fee $2.60 ETH 9.01 $46.24 $43.75
Source: Calculated by the authors according to https://coinmarketcap.com at the February 11, 2019. Mining costs calculated per KWh - 0.12 USD, Pool fee - 1%
Denisova, et al.: Blockchain Infrastructure and Growth of Global Power Consumption
International Journal of Energy Economics and Policy | Vol 9 • Issue 4 • 2019 25
the implementation of environmental and social programs in the
eld of health (Nandha and Faff, 2008).
Experts note that the digital transition in the electric power
industry allows not only to increase the efciency of the traditional
energy system, but also opens up new opportunities for involving
distributed generation in the energy exchange, including on the
basis of renewable energy sources, energy storage systems, devices
and complexes with regulated consumption, for the organization
of a variety of energy services (Table 2).
There is a myriad of cryptocurrencies: According to the portal
coinmarketcap.com, at the end of April 2018, their number
approached 1600.3 Externally, they have a number of similarities
with at money, which is issued by Central banks, but does not
perform, or does not fully perform the prescribed set of functions.
Cryptocurrencies are only partly inherent in the function of money
as a universal equivalent, or measure of value. Currently, prices for a
very limited range of goods and services are denominated in digital
currencies. If consider the most famous of them — bitcoin, then,
according to the portal coinmap.org at the end of April 2018, it was
accepted by only about 12.3 thousand points of sale worldwide4.
They are distributed very unevenly: The highest concentration
is observed in Western Europe and the United States. There
is a sporadic presence in South-East Asia and Latin America.
At the same time, most of them are companies specializing in
online trading. The number of well-known ofine sellers that
accept payments in bitcoins is very small: One can mention the
manufacturer of computer equipment Dell and two air carriers —
Air Baltic and Air Lituanica.
Since bitcoin does not fully perform the function of money as a
measure of value, it is difcult to use it as a means of payment.
Along with a relatively narrow geographical area of active use,
operational risks act as a limiting factor.
Firstly, in a number of countries (China, Vietnam, Iceland, Bolivia,
Ecuador) transactions using bitcoin are prohibited or are in the “gray”
zone. In the vast majority of national jurisdictions, its status has yet
to be determined. Therefore, international payments using bitcoin
are often carried out “at your own risk.” Secondly, as it is often the
3 https://coinmarketcap.com/all/views/all/
4 https://coinmap.org/#/world/55.72505411/37.62896485/3
case at the stage of innovation, there are cases of outright fraud.
This is especially true for e-wallets, which are used for temporary
storage of funds in cryptocurrency. They are bankrupted by the
owners on purpose, and are subject to hacker attacks.
The non-transparent nature of many bitcoin-mediated transactions
also has a negative impact. The legal gaps related to this
cryptocurrency, do not allow to exclude the possibility that there
might be transactions aimed at laundering of criminal proceeds,
support for terrorist organizations, etc. With this in mind, it can be
assumed that transactions in bitcoins and other cryptocurrencies can
be banned in leading nancial countries (USA and EU) in the case of
detection of terrorist nancing attacks (both occurred and potential).
It is worth mentioning that FATF was wary of the emergence of
cryptocurrencies. In 2015, they put forward that it is necessary to
assess the feasibility of their admission to circulation, among other
instruments, using a risk-based approach that compares the benets
and costs of their ofcial recognition at the state level (FATF, 2015).
As for the performance of bitcoin as a means of accumulation,
a very high volatility of the cryptocurrency rate plays a negative
role here.
After almost “vertical take-off” there was a sensitive correction,
with intraday uctuations in its rate reached several tens of
percent. During February—April, 2018, it periodically fell below
7 thousand dollars (the peak was reached at $20,000).
This volatile dynamic has forced experts to talk about the high
probability of an asset price bubble. In a review of studies on the
modeling of bitcoin, the rst signs of the explosive dynamics of
the exchange rate of this cryptocurrency to the dollar appeared in
2012-2013 (Chapman et al., 2017; WTO, 2017).
We verify these statements by analyzing the ratio of the actual
movement of the bitcoin exchange rate and the long-term
stochastic trend of its dynamics, which is detected by the Hodrick-
Prescott lter (Figures 1-4).
The figures show the actual values stable ratios of Bitcoin,
Ethereum, Monero, Litecoin were established from November
2016 to March 2017, and in a much more pronounced form — in
November 2017 - early January 2018.
Table 2: World electricity consumption, TWh
Region 2000 2005 2010 2015 2020 2025 Growth in 2015-2025, times
World 12,637.50 15,059.53 17,839.24 20,038.18 22,536.22 25,307.09 0.3
Europe 2.836.72 3139.27 3261.15 3,217.69 3,397.51 3,528.32 0.1
Asia 3248.50 4649.49 6666.03 8,447.23 10,409.81 12,487.89 0.5
Africa 358.59 457.73 539.06 611.95 708.73 866.51 0.4
Middle-East 379.01 503.00 728.08 905.69 993.51 1058.60 0.2
North America 3976.44 4236.63 4265.03 4280.39 4335.01 4383.31 0.0
Latin America 773.94 921.05 1101.47 1276.54 1333,96 1489.14 0.2
CIS 854.13 921.26 1024.88 1042.75 1100.80 1223.06 0.2
Pacic 210.16 231.09 253,53 255.94 256.88 270.25 0.1
Source: Calculated by the authors according to https://eneroutlook.enerdata.net
Denisova, et al.: Blockchain Infrastructure and Growth of Global Power Consumption
International Journal of Energy Economics and Policy | Vol 9 • Issue 4 • 2019
26
At the same time, the results indicate the presence of episodes of
the boom in this market, but do not allow us to say directly that
there was a transformation into an uncontrolled price growth, or
a “bubble”. Although the standard techniques for the recognition
of “bubbles” in nancial markets do not exist, for this purpose
they often use the comparison of the identied boom episodes
with some of the abnormal levels.
As such, the levels corresponding to one and a half or two standard
deviations (SV) of the subtraction between the actual and trend
dynamics are used (Jorda et al., 2015).
Figures 1-4 show that the episodes of the booming growth of the
bitcoin exchange rate in 2013 and 2016 - early 2017 were not
a “bubble”. It was formed only at the last stage - at the end of
November 2017, when the bitcoin rate “broke” both proposed levels.
It should be borne in mind that the high volatility of the bitcoin
exchange rate is associated with a relatively small “depth” of this
segment of the cryptocurrency market.
According to coindesk.com, the capitalization5 of bitcoin on April 25,
2018 was about $160.7 billion. Other segments of the cryptocurrency
market competing with it are characterized by signicantly lower
capitalization: For example, in the case of Ethereum the most
famous alternative to bitcoin - this parameter was approximately $66
billion. By the standards of modern nancial markets, these indicators
can hardly be considered impressive. The total capitalization of
digital currencies in early 2018 reached $700 billion6.
This value is comparable to the capitalization of Brazil’s smaller
equity markets ($759 billion) and Spain’s (704 billion) at the end
of 2016, accounting for only 2.6% of the capitalization of the
U.S. market7.
5 The capitalization of bitcoin as a segment of the cryptocurrency market is
calculated by analogy with the capitalization of the stock market — as a
product of the number of bitcoins in circulation at the value of their current
exchange rate to the U.S. dollar.
6 https://coinmarketcap.com/charts
7 World Bank Data (https://data.worldbank.org/indicator/CM.MKT.LCAP.
CD). Dynamics of bitcoin to the U.S. dollar exchange rate, July 2010-April
2018 (daily data).
Figure 1: BTC rate
Source: www.coinmarketcap.com, Thomson Reuters.
Figure 2: ETH rate
Source: www.coinmarketcap.com, Thomson Reuters
Denisova, et al.: Blockchain Infrastructure and Growth of Global Power Consumption
International Journal of Energy Economics and Policy | Vol 9 • Issue 4 • 2019 27
High volatility of the cryptocurrency exchange rates and relatively
low capitalization make it possible to assert that even bitcoin does
not fully meet the criteria of information efciency of the market.
As shown in a number of empirical studies (Urquhart, 2016;
Bariviera, 2017; Kumar Tiwari et al., 2018), bitcoin exchange
rate shows signs of improvement in market efciency not earlier
than since 2014.
Therefore, institutional investors with signicant investment
volumes, but moderate risk appetite, will not come to the
cryptocurrency market soon. Thus, it is doubtful whether they
have the key function of money - absolute liquidity, and at the
moment can hardly be considered to be real money.
It is appropriate to draw parallels between the competition among
crypto-currencies and the concept of private money by F. Hayek.
It presupposes the adversarial nature of different currencies, which
should result in the rejection of inefciently managed monetary
systems (Cong and He, 2017; Makrichoriti and Moratis, 2016).
For now, it is difcult to say that in relation to cryptocurrencies
this process is dynamic. Judging by the changes in the market
concentration index calculated by the capitalization of the leading
digital currencies (CR-4) and the HHI, it is clear that this market
remained essentially monocentric in 2014-2016.
Only in the second half of 2017, with the drop in the share of
bitcoin to 40%, there was a noticeable decrease in concentration
(Table 3).
This balance of power among digital currencies is associated
with their high volatility, demonstrating limited opportunities
Figure 3: XMR rate
Source: www.coinmarketcap.com, Thomson Reuters
Figure 4: LTC rate
Source: www.coinmarketcap.com, Thomson Reuters
Denisova, et al.: Blockchain Infrastructure and Growth of Global Power Consumption
International Journal of Energy Economics and Policy | Vol 9 • Issue 4 • 2019
28
for effective diversication and, as a result, a high probability of
“herd behavior” of investors putting their money in these assets.
Sovereign States are justiably distancing themselves from direct
participation in such competition with digital assets that are not
linked to a single emission center. But some of them do not exclude
the use of blockchain technologies for the transition to electronic
money along with paper, and then instead (Mbiti and Weil, 2011;
Osah and Kyobe, 2017).
In this case, such an initiative should be interpreted as an implicit
attempt to carry out a conscation monetary reform, since the
expected ight from the ofcial currency, Bolívar, is taking place
against the background of hyperination.
In addition, it is also a step towards restarting the country’s
international settlements in the conditions of economic sanctions
and a steady reduction in gold and foreign exchange reserves. It is
signicant that the Venezuelan authorities have a negative attitude
to the resolution of operations in bitcoins, apparently because that
they believe that with the help of this cryptocurrency a massive
withdrawal of capital from the country can be carried out, as
happened during the political crisis in Argentina in 2015 (Raskin
and Yermack, 2016).
In the article by Luther, Salter, 2017, it is also shown that against
the background of the European nancial crisis in the countries
whose banking system was in the most vulnerable position (Spain,
Italy), the number of downloads of applications that allow the
purchase and sale of bitcoins has increased signicantly. The
authors found that the same reaction of the population was typical
for Cyprus, where against the background of the banking crisis
in 2013 an extreme form of nancial repression policy (partial
deposit haircuts) was applied.
5. CONCLUSION
The digital currency itself will become the third element of the
monetary base along with cash and reserves of commercial banks.
The rate of its emission will depend on the activity of users’
transactions. At the same time, it is impossible to exclude, if
necessary, the introduction of additional discretionary elements,
such as the establishment of negative interest rates, as well as
temporarily excessive emission of cryptocurrency to stimulate
economic growth.
Blockchain technologies promise significant changes in the
nancial sector. It direct result of their implementation should be
a signicant reduction in the costs associated with the operation
of nancial intermediaries and markets.
Decentralizing the interaction of economic agents and eliminating
the excessive costs associated with many nancial transactions can
create conditions for more intense competition among existing
nancial institutions and reduce entry barriers for new players. In
the long term, this will allow the transition from a predominantly
oligopolistic structure of the nancial sector in most countries to
a more competitive structure a contestable market, where large
nancial institutions may be present, but their market power is
limited by the threat of virtually unimpeded entry of more exible,
innovation-oriented newcomers (He et al., 2017).
Nevertheless, for the practical implementation of such a scenario
and achieving a noticeable gain in public welfare, it is necessary
to adequately manage the risks associated with digital nancial
innovations, especially in terms of admission to free circulation
and regulation of investments in cryptocurrencies.
At the moment, bitcoin consumes mainly very cheap electricity.
As a result, the bitcoin network typically uses energy where it is
abundant and cannot be stored or exported.
In countries where hydrocarbons are difficult to export, for
example, in countries without access to the sea, bitcoin is
extracted and “harmful” electricity. But most miners are powered
by electricity from hydroelectric power plants, geysers, and
geothermal vents that cannot be transported or stored.
Bitcoin will continue to look for such cheap and not used for other
purposes sources of energy, as mining in cities or industrial centers
will continue to be not protable. It is possible that you spend on
air conditioning or heating water more than the miner can afford.
If the price of bitcoin stabilizes, and enough miners come to this
market, in the near future we can expect a vefold increase in
their energy consumption.
In the distant future, bitcoin mining will become less and less
protable. The current average value (12.5 bitcoins per block)
will be halved every 4 years until it reaches zero. Transaction fees
(currently two bitcoins per block) are likely to remain the same.
In this case, the energy consumed will depend on the size of the
Commission and the price of bitcoin. If the price reaches $1 million
per bitcoin, two bitcoins per block will lead to a situation where
every 10 min electricity is burned at $2 million.
In light of all this, does bitcoin look like such a big burden on the
neck of the world energy? Given the tendency of bitcoin mining
to use renewable resources and the fact that the traditional banking
system is not environmentally friendly, it is possible that the
cryptocurrency has a positive impact on the environment.
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Coefcient 2014 2015 2016 2017 2018
CR-4 95.09 93.68 96.34 92.84 64.30
HHI 7714 6350 8353 7714 2232
Source: Calculated by the authors according to https://coinmarketcap.com/
charts/#dominancepercentage
Denisova, et al.: Blockchain Infrastructure and Growth of Global Power Consumption
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